The consensus is that the prime minister’s trip to Washington went well enough, even if “well enough” basically means Donald Trump didn’t blow up at us in public. To my eye, President Trump’s body language wasn’t nearly as warm as with the Japanese prime minister, with whom he seems best buddies already.

In fact, Mr. Trudeau’s more important meeting may have been with House Speaker Paul Ryan. In their one-minute photo op, they bantered promisingly about hockey, with Mr. Ryan jovially accusing Canada of stealing all the U.S.’s best players. Just so long as he doesn’t think we’re stealing Americans’ trade lunch, too. Since, unlike Trump, Ryan’s an actual Republican and therefore a free trader, I suspect he doesn’t.

On the other hand, he’s also co-author of “A Better Way,” the House Republicans’ economic blueprint, which, when they published it last summer, no one thought had a chance of actually being implemented. But times have changed, radically, after the political earthquake on Nov. 8.

The House Republicans’ plan might just survive a WTO challenge

“A Better Way” is the source of the infamous border-adjustment tax that, if it goes through, will have a bigger effect on Canada than even terrific, wonderful, fabulous personal atmospherics between the prime minister and the president would. “Aftershocks,” a C. D. Howe Institute study by Dan Ciuriak and Jingliang Xiao released this week, suggests its effect could be as much as a $73-billion hit to the value of our GDP (although not so much on export volumes as on the lower prices our exports will fetch).

Would a border tax just be mindless protectionism? For some in Congress, sure. But a new paper by trade experts Gary Clyde Hufbauer and Zhiyao Lu of Washington’s Peterson Institute for International Economics, suggests the plan might actually be WTO-compatible. Most countries, Canada included, tax goods where they’re consumed (on a “destination basis”) using value-added taxes. Thus, Canadian exports don’t pay GST because they’re not consumed in Canada, while foreign imports are charged GST, because they’re consumed here.

The U.S., ever exceptional, doesn’t have a VAT—and would find it even harder to introduce one than we did, Ciuriak and Xiao argue. What it does instead is tax the corporations that produce goods. Speaker Ryan and his fellow House Republicans would reduce the corporate income tax from 36 to 20 per cent, which would be good for U.S. competitiveness all on its own, but they also want to mimic a VAT by neither taxing corporations on income derived from their exports, nor letting them deduct the costs of imported intermediate goodswhen calculating the cash flow on which corporate tax would now be levied.

The WTO is fine with VATs (like our GST) that exempt exports and tax imports. But the House Republicans’ plan is VAT-like and might actually survive a WTO challenge, though that would take five years to adjudicate, assuming countries did challenge it, and many might not want to.

Hufbauer and Xiao put Canada in the category of those who might opt to suffer in silence, along with Mexico, Japan, Australia, and Korea, smaller countries crucially linked to the U.S. Europe and China, on the other hand, might challenge away. Even if they do, there’s always the possibility the WTO might successfully renegotiate its rules on such matters—though “WTO” and “successfully renegotiate” are a word pairing you don’t hear often these days. In sum, hard as it is to predict what the US.. House, Senate and president will jointly produce, we should be hunkering down for harder times.

In a nice turn of phrase, Ciuriak and Xiao say the question of what effects a U.S. border tax would have is “intensely empirical.” And, of course, being economics, it depends on assumptions. With U.S. exports no longer taxed and therefore cheaper on world markets, and with imports to the U.S. taxed and therefore more expensive in the American market, the U.S. economy would try to produce both more exports and more import-substitutes at the same time.

Could it? The U.S. unemployment rate is just 4.8 per cent, which suggests there’s not much slack. On the other hand, labour-force participation is also low, which suggests there’s more slack than it appears. So it’s hard to say how much of the response will be more output and how much price changes, including a higher U.S. dollar.

Then there are capital flows to consider. If the corporation tax does fall to 20 per cent, U.S. corporate capital will come home and foreign capital will also flood in, which will boost the dollar, too.

Some scenarios involve more quantity adjustments for us, others more price adjustments. Almost none are pleasant. In Ciuriak and Xiao’s baseline, the hit to our economic welfare is bigger than to Mexico’s, and three-quarters the hit to China’s.

Bottom line? We need to get Ivanka Trump busy lobbying for us. If push comes to shove, we may have to send some American hockey players back.